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4) Arnold Barker is considering extending credit to a group of new customers. The new customers will generate an average of $35,000 per day in
4) Arnold Barker is considering extending credit to a group of new customers. The new customers will generate an average of $35,000 per day in new sales. On average, they will pay in 30 days. The variable cost ratio is 80% and the default rate is 10% of sales. If the cost of capital is 12%, what is the NPV of one days sales if Arnold grants credit.
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